Figure 11.6Referring to Figure 11.6, how much economic profit does the monopolistically competitive firm earn in long-run equilibrium?
What will be an ideal response?
As illustrated on the graph, the firm earns zero economic profit in long-run equilibrium. At the quantity Q the price P is just equal to long-run average cost. The firm earns just enough to stay in business.
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The curve that shows how the best affordable consumption bundle changes as the price of a good changes (holding the consumer's income, preferences and all other prices fixed) is called
A. a price-consumption curve. B. an individual demand curve. C. an income-consumption curve. D. a budget line.
Checking account balances are:
A. not included in M1. B. not money. C. included in M2 but not M1. D. included in M1 and serve as a medium of exchange.
Why do economists think that the structural deficit is a good measure of the direction of fiscal policy?
A. Because it adjusts over the business cycle and reflects the fiscal stimulus of policy. B. Because it changes when policy changes, rather than when the economy changes. C. Because it changes when monetary policy changes, reflecting the interest rate cost of debt. D. Because it adjusts automatically, rather than requiring specific legislation.
The general rule for hiring any input (say, labor) in the profit-maximizing amount is MRC = MRP. This rule takes the special form W = MRP (where W is the wage rate) when the:
A. labor supply curve is upsloping. B. supply of labor is inelastic. C. firm is hiring labor under purely competitive conditions. D. firm is hiring labor under imperfectly competitive conditions.